The Labor Department said that initial unemployment claims rose to 399,000 during the first week of the new year.  The number of people filing jobless claims climbed by 24,000 to 399,000 in the week ended Jan. 7, 2012, representing the highest level since the last week of November 2011.  As some economists (and some non-economists as well) had cautioned, the unemployment rate drop to 8.5 percent reported in December may have been slightly skewed as a result of discouraged workers dropping out of the work force and seasonal hirings.

The unemployment news, coupled with weaker than expected retail sales data during December, has raised the caution flag once again as a sign that our road to economic recovery still has potholes.  The news also tempered market sentiment with the Dow Jones slipping into the red following the reports.

Jonathan Basile, as senior economist at Credit Suisse in New York had expected even higher numbers; projecting claims to rise to 405,000.

 There is usually a surge in seasonal layoffs at this time, and that is what’s happening here.  Claims have shown an improving trend.  It’s a vote of confidence for continued improvement in the labor market, he said.